ITO 21(1)(3), Mumbai V. DEVENDRA SINGH NARULA, Mumbai

ITA 759/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6716 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 11-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K GUBGOTRA J
• Keywords: Bogus purchase; Gift; Corroborative evidences
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH MUMBAI BEFORE SHRI R.C.SHARMA, ACCOUNTANT MEMBER ITA NO. 759 & 760/MUM/2019 ( ASSESSMENT YEAR: 2009-10 & 2010-11) I.T.O.-21(1)(3), ROOM NO. 106, 1 ST FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI-400012. VS. DEVENDRA SINGH NARULA, B-8, MAHIM IND. ESTATE, OFF MORI ROAD, MAHIM (WEST), MUMBAI-400016. PAN/GIR NO. AAAPN 4638 D (APPELLANT ) .. (RESPONDENT ) REVENUE BY SHRI R.K. GUBGOTRA (JCIT-DR) ASSESSEE BY NONE DATE OF HEARING 05/02/2020 DATE OF PRONOUNCEMENT 06/02/2020 / O R D E R PER: R.C. SHARMA, A.M. THESE ARE THE APPEALS FILED BY THE REVENUE AGAINST THE COMMON ORDERS OF THE LD. CIT(A)-48, MUMBAI DATED 30/11/201 8 FOR THE A.Y. 2009-10 AND 2010-11 IN THE MATTER OF ORDER PASSED U /S 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT) . 2. IN BOTH THESE APPEALS, THE REVENUE IS AGGRIEVED BY THE ORDER OF THE LD. CIT(A) FOR REDUCING ADDITION TO THE EXTENT OF 12.5% OF ALLEGED BOGUS PURCHASES. 3. I HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW AND FOUND THAT THE ASSESSEE IS ENGAGED IN THE TRADING O F GIFT ARTICLES. THE ITA NO. 759 & 760/MUM/2019 ITO VS DEVENDRA SINGH NARULA 2 A.O. GOT INFORMATION FROM THE SALES TAX DEPARTMENT REGARDING ASSESSEE TAKING BOGUS PURCHASE BILLS. AFTER MAKING ENQUIRY, THE A.O. ADDED 100% OF ALLEGED BOGUS PURCHASES IN ASSESSEES INCOME. BY THE IMPUGNED ORDER, THE LD. CIT(A) HAS RESTRICTED THE A DDITION TO THE EXTENT OF 12.5% AFTER OBSERVING AS UNDER: QUANTUM ADDITION ISSUE :- COMING TO THE ISSUE REGA RDING ADDITION ON ACCOUNT OF BOGUS PURCHASES, IT IS SEEN THAT ASSE SSEE HAD CLAIMED PURCHASES FROM THE PARTIES INVOLVED IN PROVIDING BO GUS BILLS AS PER THE PRELIMINARY INVESTIGATION MADE BY THE INVESTIGATION WING. WHEN THE ASSESSEE WAS CONFRONTED TO SUBSTANTIATE THE GENUINE NESS OF THE PURCHASES, THE ASSESSEE IN ALL THE 3 ASSESSMENT YEA RS FAILED TO SUBSTANTIATE THE PURCHASES AND THE RECEIPT OF GOODS THROUGH CORROBORATIVE EVIDENCES. MERELY SUBMITTING OF LEDGE R ACCOUNT, SALES INVOICES AND BANK STATEMENT ARE NOT ENOUGH WHEN THE TRANSACTION ITSELF IS BEING QUESTIONED. THE ONUS IS ENTIRELY ON ASSESSEE TO SUBMIT THE CONTEMPORARY EVIDENCES, WHICH WOULD CORROBORATE THE PURCHASES MADE BY ASSESSEE FROM THE ALLEGED PARTY. LEDGER ACCOUNT, SALES INVOICES AND BANK ACCOUNT ARE ONLY INTERNAL AND SELF JUSTIFYING DOCUM ENTS. ASSESSEE IS BOUND TO SUBMIT THE DOCUMENTS IN THE FORM OF DELIVE RY CHALLAN, STOCK REGISTER AND INTERNAL CONSUMPTION REGISTER. SINCE A SSESSEE IS ENGAGED IN THE TRADING ACTIVITY, IT IS HELD BY ASSESSING OFFIC ER FOR ASSESSMENT YEAR 2010- 11 AND ASSESSMENT YEAR 2011-12, THAT IN THE ABSENCE OF RECEIPT OF GOODS FROM THE PARTIES INVOLVED ASSESSEE WOULD HAVE PURCH ASED THE GOODS FROM THE GREY MARKET AS THE SALES OF THE ASSESSEE WERE N OT DISTURBED BY THE ASSESSING OFFICER. THEREFORE, HOLDING THAT THERE WO ULD BE SOME PROFIT ELEMENT INVOLVED IN THIS WHOLE TRANSACTION. THE ASS ESSING OFFICER MADE ADDITION OF THE PROFIT ELEMENT INVOLVED IN THE WHOL E PROCESS. THE ADDITION FOR ASSESSMENT YEAR 2010-11 WAS 16.33% OF THE BOGUS GOODS VALUE WHILE IT WAS 12.5% FOR THE ASSESSMENT YEAR 2011-12. HOWEVER FOR ITA NO. 759 & 760/MUM/2019 ITO VS DEVENDRA SINGH NARULA 3 ASSESSMENT YEAR 2009-10, ASSESSING OFFICER MADE THE ADDITION OF THE ENTIRE AMOUNT OF RS,10,92,411/- AND ALSO COMMISSION AMOUNT OF 2% OF RUPEES TO RS.22,222/-. THE ARGUMENT OF THE ASSESSIN G OFFICER FOR A.Y. 2009-10 WAS THAT ASSESSEE HAD NOT MADE ANY PURCHASE S AND THEREFORE, THERE WERE ACTUALLY NO SALES ALSO OF THE SE GOODS. THERE BY THE ASSESSING OFFICER CONCLUDED THAT ASSESSEE HAD I NTRODUCED HIS OWN BLACK MONEY WITHOUT ACTUALLY HAVING MADE THE SALES OF THI S VALUE. THEREFORE, ASSESSING OFFICER HAD MADE THE ADDITION OF ENTIRE A MOUNT OF RS 10,92,411/- AS BOGUS SALES. ESTIMATION AS VALID TOOL IN THE HANDS OF ASSESSING OFFICER:- I. IT WOULD BE RELEVANT HERE TO DISCUSS THE LEGAL P OSITION REGARDING BEST JUDGEMENT ASSESSMENTS AND THE EXTRAPOLATION OF THE INCOME/TURN-OVER ON ESTIMATION BASIS ESTIMATION AND EXTRAPOLATION ARE VALID TOOLS IN THE HANDS OF A 0 WHILE MAKING AS SESSMENT OF THE INCOME HOWEVER, IT IS SETTLED POSITION OF LAW THAT SUCH ESTIMATION OR EXTRAPOLATION MUST BE LOGICAL AND BONAFIDE ESTIMATI ON THE RATIO OF JUDGEMENT LAID DOWN BY HONBLE SUPREME COURT IN THE CASE OF COMMISSIONER OF SALES TAX, M P. V/S H.M ESUFALI ALI H M ABDULALI IS RELIED UPON WHILE DECIDING THIS APPEAL. HONBLE SUP REME COURT WHILE DECIDING THE CIVIL APPEAL NO 1068 AND OF 1970 HAD H ELD BEST JUDGEMENT ASSESSMENT/ESTIMATION AS VALID TOOL IN TH E HANDS OF OFFICER WHICH IS MADE ON THE BASIS OF MATERIAL BEFO RE HIM HONBLE APEX COURT HAS HELD THAT SO LONG AS THE ESTIMATE MA DE BY HIM IS NOT ARBITRARY AND HAS NEXUS WITH THE FACTS DISCOVERED, IT CANNOT BE QUESTIONED. IT IS FURTHER HELD THAT, IN ESTIMATING ANY ESCAPED TURNOVER IT IS INEVITABLE THAT THERE IS SOME GUESSW ORK. THE ASSESSING AUTHORITY WHILE MAKING THE 'BEST-JUDGEMEN T' ASSESSMENT NO DOUBT SHOULD ARRIVE AT ITS CONCLUSION WITHOUT AN Y BIAS AND ON RATIONAL BASIS. THAT AUTHORITY SHOULD NOT BE VINDIC TIVE OR CAPRICIOUS. IF THE ESTIMATE MADE BY THE ASSESSING A UTHORITY IS A ITA NO. 759 & 760/MUM/2019 ITO VS DEVENDRA SINGH NARULA 4 BONA FIDE ESTIMATE AND IS BASED ON A RATIONAL BASIS , THE FACT THAT THERE IS NO GOOD PROOF IN SUPPORT OF THAT ESTIMATE IS IMMATERIAL. PRIMA FACIE, THE ASSESSING AUTHORITY IS THE BEST JU DGE OF THE SITUATION. IT IS HIS BEST-JUDGEMENT AND NOT OF ANY ONE ELSE'S. II. THE RATIO OF THE ABOVE DECISION OF HON'BLE SUPR EME COURT WHEN APPLIED TO THE FACTS OF PRESENT CASE IN APPEAL BEFORE THE U NDERSIGNED, WOULD LEAD TO FAIR AND LOGICAL CONCLUSION BY AO TO HOLD T HAT ASSESSEE WOULD HAVE PURCHASED THE GOODS ACTUALLY FROM THE GREY MAR KET AND THEREFORE THE ENDS OF JUSTICE WOULD BE MET IF THE PROFIT INVO LVED IN THE ENTIRE ADVENTURE IS BROUGHT TO TAX. THE CONCLUSION DRAWN B Y ASSESSING OFFICER FOR ASSESSMENT YEAR 2009-10 IS NOT BASED ON ANY SPE CIFIC FINDING IN THE ASSESSES CASE BUT IS A MERE PRESUMPTION ON THE PART OF ASSESSING OFFICER AND THEREFORE IS WITHOUT ANY BASIS CONSIDER ING THE OVERALL FACTS OF THE CASE. IT WOULD BE FAIR AND REASONABLE TO BRING TO TAX PROFIT OF 12.5% OF THE ENTIRE BOGUS PURCHASES FOR E ACH OF THE THREE ASSESSMENT YEARS. THIS PROFIT OF 12.5% WOULD BE THE TOTAL ESTIMATED PROFIT IN THIS VENTURE AND THEREFORE SEPARATE ADDIT ION OF 2% FOR ASSESSMENT YEAR 2009-10 IS TO BE DELETED. IN VIEW OF ABOVE DISCUSSION AND FINDINGS ASSESSING OFFICER IS DIRECTED TO LIMIT THE ADDITION FOR ASSESSMENT YEAR 2009-10 TO ONLY 12.5% OF TOTAL BOGUS SALES OF RS.10,11,0821-. FOR A SSESSMENT YEAR 2010-11, ASSESSING OFFICER IS DIRECTED TO REDUCE TH E ADDITION TO 12.5% OF THE BOGUS PURCHASES OF RS.76,43,032/- IN P LACE OF ADDITION MADE OF 16.33%. FOR ASSESSMENT YEAR 2011-12 ASSESSEE DOES N OT GET ANY RELIEF AS ASSESSING OFFICER HAS ALREADY MADE A FAIR ADDITION OF 12.5% OF THE TOTAL BOGUS SALES. 4. THE REVENUE IS IN FURTHER APPEAL BEFORE THE ITAT AGAINST THE ABOVE ORDER OF THE LD. CIT(A). ITA NO. 759 & 760/MUM/2019 ITO VS DEVENDRA SINGH NARULA 5 5. THE LD. DR HAS RELIED ON THE DECISION OF THE COO RDINATE BENCH DATED 23/10/2017 IN ITA NO. 2960/MUM/2016 IN THE CA SE OF SOMAN SUN CITI WHEREIN ENTIRE BOGUS PURCHASES WERE ADDED IN ASSESSEES INCOME. ACCORDINGLY, IT WAS PLEADED THAT THE LD. CI T(A) WAS NOT JUSTIFIED IN RESTRICTING ADDITION ONLY TO THE EXTENT OF 12.5% WHEN THE ENTIRE PURCHASES WERE FOUND TO BE BOGUS. 6. I HAVE CONSIDERED THE CONTENTIONS OF THE LD. DR AND ALSO GONE THROUGH THE DECISION OF THE COORDINATE BENCH AS REL IED BY THE LD DR. FROM THE RECORD, I FOUND THAT THE LD. CIT(A) HAS DE ALT WITH THE ISSUE THREADBARE AND AFTER APPLYING DECISION OF THE HONB LE SUPREME COURT IN THE CASE OF COMMISSIONER OF SALES TAX, M P. V/S H .M ESUFALI ALI H M ABDULALI TO THE FACTS OF THE INSTANT CASE, CAME TO THE CONCLUSION THAT IT WOULD BE REASONABLE TO BRING TO TAX PROFIT OF 12.5% OF THE ENTIRE BOGUS PURCHASES. THE DETAILED FINDING SO RECORDED BY THE LD. CIT(A) HAS NOT BEEN CONTROVERTED BY BRINGING ANY POSITIVE MATERIAL ON RECORD. HOWEVER, IN THE CASE OF SOMAN SUN CITY AS RELIED ON BY THE LD. DR, THE FACTS WERE ENTIRELY DIFFERENT AND FINDING OF CIT(A) WAS CONFIRMED BY THE TRIBUNAL. HOWEVER, IN THE PRESENT CASE, WE HAVE CON FIRMED THE FINDINGS OF LD. CIT(A) WHICH ARE AS PER MATERIAL ON RECORD. ACCORDINGLY, I DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LD . CIT(A), HENCE I UPHOLD THE SAME. ITA NO. 759 & 760/MUM/2019 ITO VS DEVENDRA SINGH NARULA 6 7. SINCE THE FACTS AND CIRCUMSTANCES OF BOTH THE YE ARS UNDER CONSIDERATION ARE PARI MATERIA, THEREFORE, BY FOLLO WING THE REASONING GIVEN IN THE APPEAL FOR THE A.Y. 2009-10, I ALSO UP HOLD THE ACTION OF THE LD. CIT(A) FOR THE A.Y. 2010-11. 8. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 06 TH FEBRUARY, 2020. SD/- (R.C.SHARMA) ACCOUNTANT MEMBER MUMBAI; DATED 06/02/2020 *RANJAN COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//